Section 8 Fair Market Rent (FMR) for ZIP 38109 - 2027

Investment Score for ZIP 38109

Based on 1% Rule: A+ (≥1.5%) | A (≥1.2%) | B (≥1.0%) | C (≥0.8%) | D (≥0.6%) | F (<0.6%)

FY 2027 Fair Market Rent Rates

Unit Size	Monthly FMR
Studio	$910
1 Bedroom	$990
2 Bedrooms	$1,080
3 Bedrooms	$1,430
4 Bedrooms	$1,640
5 Bedrooms	$1,902
6 Bedrooms	$2,130
7 Bedrooms	$2,300
8 Bedrooms	$2,415

Investment Analysis by Bedroom Size

Zillow median home prices vs Section 8 FMR rates (Data: 2026-07-31)

Bedrooms	Monthly FMR	Median Price	1% Rule	Grade
2BR	$1,080	$53,165	2.03%	A+
3BR	$1,430	$93,281	1.53%	A+
4BR	$1,640	$116,871	1.4%	A
5BR	$1,902	$153,946	1.24%	A

Demographics & Housing Statistics

U.S. Census Bureau data (2024)

### Market Analysis for ZIP Code 38109 (Memphis, TN) #### Section 8 Voucher Dynamics The Fair Market Rent (FMR) for ZIP code 38109 in Memphis, TN, is set by HUD for 2026 as follows: - 0BR: $900 - 1BR: $980 - 2BR: $1080 (which represents 34.6% of the median household income) - 3BR: $1430 - 4BR: $1660 These figures represent the maximum amount that a Section 8 voucher holder can pay for rent. However, the actual rents in the area can be significantly higher. For instance, the Zillow median price for a 2BR unit is $54,551, which translates into a monthly rental cost of approximately $4,546 based on typical mortgage payments and property management costs. This is nearly 4.2 times the FMR for a 2BR unit. Consequently, voucher holders face significant constraints in finding affordable housing that fits within their budget. The high disparity between actual rents and FMR suggests that landlords who wish to participate in the Section 8 program must adjust their rental rates to remain competitive and attract tenants. #### Affordability & Renter Profile ZIP code 38109 has a population of 42,452, with 44.3% of residents being renters. This indicates a substantial demand for rental properties in the area. The occupancy rate stands at 88.1%, suggesting that the market is relatively tight but not fully saturated. Given the median household income of $37,496, it is clear that many residents struggle with affordability. The FMR for a 2BR unit at $1080 is only 34.6% of the median income, which means that even at the FMR level, the cost of housing can be a significant burden for many households. The high price-to-FMR ratio of 4.2x for 2BR units further underscores the challenge faced by low-income renters. This ratio implies that the average market rent is much higher than what voucher holders can afford, making it difficult for them to find suitable housing without additional financial support. Therefore, the market is likely to be challenging for low-income renters, particularly those relying solely on Section 8 vouchers. #### Investor Angle From an investor perspective, the ZIP code 38109 presents both opportunities and challenges. The FMR levels provide a benchmark for rental pricing, but the actual market rents are substantially higher. For example, a 2BR unit priced at the FMR of $1080 would be significantly below the market median of $4,546. This means that investors who target the Section 8 market must be prepared to accept lower rental rates compared to the broader market. However, the tight occupancy rate of 88.1% suggests that there is still strong demand for rental properties, especially among low-income households. Investors who can offer affordable housing options within the FMR guidelines may find a steady stream of tenants. Additionally, the high proportion of renters (44.3%) indicates a robust rental market overall, which could provide some stability and predictability for investors. To determine if this ZIP code is cash-flow positive at FMR, we need to consider the typical expenses associated with owning and managing rental properties. Assuming a conservative estimate of operating expenses (including maintenance, utilities, insurance, and property taxes) at around 50% of the FMR, the net income for a 2BR unit would be: \[ \text{Net Income} = \text{FMR} - (\text{FMR} \times 0.5) \] \[ \text{Net Income} = \$1080 - (\$1080 \times 0.5) = \$1080 - \$540 = \$540 \] This net income of $540 per month would need to cover any mortgage payments or other financing costs. If the investor can secure a property at a reasonable price and manage costs effectively, the FMR could potentially yield a positive cash flow. However, given the high price-to-FMR ratio, it is essential to ensure that the purchase price aligns with the FMR to avoid negative cash flow scenarios. #### Specific Actionable Insights 1. **Focus on Affordable Units**: Investors should focus on acquiring or developing units that fall within the FMR guidelines. For a 2BR unit, this means setting the rent at $1080 or less. This will make the property attractive to Section 8 voucher holders and ensure a steady stream of tenants. 2. **Consider Smaller Units**: Given the high price-to-FMR ratio for larger units, investors might want to prioritize smaller units such as 0BR or 1BR apartments. These units have lower FMRs ($900 and $980 respectively), which may be closer to the actual market rents for these sizes. This could help mitigate the risk of negative cash flow while still catering to the needs of low-income renters. #### Bottom Line For investors focusing on the Section 8 market, ZIP code 38109 presents a mixed picture. While there is a strong demand for rental properties, the high price-to-FMR ratio poses significant challenges. The recommendation for investors is to **Hold** on to existing properties that fit within the FMR guidelines and carefully evaluate new investments. Acquiring properties at or below the FMR levels for 0BR, 1BR, and 2BR units could be a viable strategy, but investors must be cautious about the potential for negative cash flow due to the high market rents. In summary, the market dynamics in ZIP code 38109 suggest that while there is a need for affordable housing, the actual rents far exceed the FMR. This makes it challenging for Section 8 voucher holders to find suitable housing and requires careful consideration for investors looking to enter this market.

Data Sources: FMR data from HUD (2027). Median home prices from Zillow (2026-07-31). Demographics from U.S. Census (2024).

About FMR: Fair Market Rent (FMR) is used to determine payment standards for the Section 8 Housing Choice Voucher program, initial renewal rents for some expiring project-based Section 8 contracts, and rent ceilings for HOME Investment Partnerships.